Lars Östman towards a general theory of financial control

 

Describing the design of control systems 

 

Financial control systems are defined as mechanisms that relate visions and functions to 

resources and where money is involved directly or indirectly. Ultimately, they are based on 

money, that is to say, widely transferable rights and obligations that presume trust in 

transferability and, as media of exchange, make almost all sorts of transactions possible. 

Control systems, with money as the fundamental element, have a broad and varied character. 

My descriptions of such systems cover some different and interrelated primary aspects. 

How are rules related to each other? Applied rules – about decision-making, 

measurement, financial sources, payments, construction of financial instruments, procedures 

and communication – can either be legal in their nature or simply be exercised practically. 

The issue of how rules are related to each other is important not least in the fields of 

accounting measurement and financial reporting. Consistency is decisive for what the 

meaning of comparisons will be.  

What is represented and how is this done? The contents of financial control systems can 

be regarded in relation to individual events that will take place or have taken place. Numbers 

and text are common tools of expression but not the only ones; for instance, visual means 

have become more and more important, even if it is difficult to show an administrative 

process visually. Measures may more or less represent what has actually happened or will 

happen in individual cases. An important long-range trend during the last century was that 

financial control systems represent identifiable individual circumstances to a lesser degree. 

Who are the intended or actual users of a system, in what context do they use it and how 

do they use it? A users´ perspective can be applied to a financial control system. At least 

since the mid-20

th

 century, usefulness has been a keyword in academic texts about financial 

accounting as well as management control. When particular systems are designed, 

developers normally think of a target group and representation is varied with regard to 

usefulness and the behaviour of this group. Designers have acquired some picture of this 

behaviour in the specific case – they accept and adapt to it or they want actively to change it 

(which is common for internal systems). The evolution of systems in a broader sense may 

have its starting point in the procedures for how and why a customer buys a product – 

organisations build systems to capture and affect these procedures. There is an interaction 

between those system components that are partially outside the organisation and the totally 

internal systems.